* CEE assets gain as dollar crosses key 1.50 mark vs euro
* Poland c.bank keeps rates on hold at 3.50 pct as expected
* Leu carry comes in focus; unit hits highest since Oct. 1
(Adds Polish rate decision, quote)
By Marton Dunai and Marius Zaharia
BUDAPEST/BUCHAREST, Nov 25 (Reuters) - Currencies in
emerging Europe rose on Wednesday and bond yields followed lower
as the dollar weakened and the Polish central bank left interest
rates flat at 3.5 percent, as expected.
Poland is the only country in the region to have escaped
recession. Improving macroeconomic data and inflation under
control are expected to maintain a stable outlook for rates at
record lows in the mid-term.
"The (Monetary Policy) Council sees that the macroeconomic
forecasts are improving," said Ernest Pytlarczyk, chief analyst
at Bre Bank.
"There are more and more signals of revival in the global
and Polish economy. These MPC meetings are now straightforward.
Interest rate hikes will come only in the second half of 2010
when the forecasts of economic revival will materialise."
The zloty <EURPLN=> and Polish bonds were unmoved by the
decision. The currency traded up 0.6 percent at 1238 GMT, as the
dollar, often a barometer of risk appetite, hit a 7-week low
versus the yen and again crossed the 1.50 mark against the euro
Hungary's forint <EURHUF=>gained 0.3 percent and Romania's
leu <EURRON=> edged up 0.2 percent to hit its highest since Oct.
1 at 4.2545 per euro, while the Czech crown <EURCZK=> added 0.4
percent.
Markets have largely ignored Hungary's decision earlier in
the week to trim rates by another 50 basis points to bring the
key rate to 6.5 percent, the lowest level since mid 2006.
[]
The only unit that seemed to be moved by Hungary's easing
monetary conditions was the leu, as the rate cut has shone a
light on Romania's highest interest rates in the European Union
at 8 percent.
"Leu carry seems more attractive now that Hungary continues
its easing process," one dealer in Bucharest said.
Markets also anticipate political tensions would end soon
after the second round of a presidential election on Dec. 6.
Leftist leader Mircea Geoana's chances to beat incumbent
President Traian Basescu rose after he struck a deal to form a
cabinet with the centrist grouping whose candidate came in third
in the first round. []
The crown recouped some losses after falling to the 26 per
euro level dealers said it had targeted. It is widely expected
to change little in the coming weeks as almost nobody sees the
central bank lowering interest rates in December.
"The 26 per euro level is what we'll see until the end of
the year and we could (move) in a range of 25.900 to 26.100," a
Prague dealer said.
Another potential risk could be defused in Latvia, where the
prime minister said the country's loan programme with the
European Union and International Monetary Fund will remain on
track if parliament passes the planned 2010 budget. []
BOND YIELDS LOWER
Bonds yields region-wide ticked a tad lower, in lockstep
with currencies.
In Poland, bonds shrugged off retail sales data, which
showed slightly lower growth than forecast [], as
well as unemployment figures, which came in, as expected, at
11.1 percent [].
"Generally there aren't many changes on the market, global
sentiment is positive," a Warsaw-based dealer said. "The finance
ministry will want to sell lots tomorrow to improve the
ministry's plight next year."
Poland's budget deficit is expected to rise to 7 percent in
2010 from 6.2 percent seen in 2009. []
Hungarian and Czech yields were also lower in quiet trade.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.965 26.069 +0.4% +3.03%
Polish zloty <EURPLN=> 4.1 4.123 +0.56% +0.37%
Hungarian forint <EURHUF=> 267.25 268.12 +0.33% -1.38%
Croatian kuna <EURHRK=> 7.308 7.305 -0.04% +0.78%
Romanian leu <EURRON=> 4.258 4.265 +0.16% -5.72%
Serbian dinar <EURRSD=> 94.496 94.02 -0.5% -5.31%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR -8 basis points to +96bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +112bps over bmk*
10-yr T-bond CZ10YT=RR -6 basis points to +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR 0 basis points to +358bps over bmk*
5-yr T-bond PL5YT=RR 0 basis points to +327bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +287bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +511bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +464bps over bmk*
10-yr T-bond HU10YT=RR 0 basis points to +410bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1438 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
(Reporting by Marton Dunai and Marius Zaharia; Editing by
Matthew Jones)
((marton.dunai@reuters.com; +36 1 327 4742; Reuters Messaging:
marton.dunai.reuters.com@reuters.net))
